Q4 2020 Fortis Inc Earnings Call
Ladies and gentlemen, thank you for standing by my name is Michelle and I will be your conference operator today welcome kits Fortis Q4, 2020 conference call and webcast during the call all participants will be in a listen only mode.
The question and answer session. Following the presentation at that time those are the questions should press star followed by the number one on your telephone if at any time during the conference you need to reach out to an operator. Please press star zero at this time I would like to turn the conference over to.
Stephanie the Mimo. Please go ahead Mr Mimo.
Thanks, Michelle and good morning, everyone and welcome to Fortis is fourth quarter and annual 2020 results Conference call I'm joined by David Hutchens, President and CEO, Jocelyn Perry Executive VP and CFO other members of the senior management team as well the Ceos from certain subsidiaries.
Before we begin today's call I want to remind you that the discussion will include forward looking information, which is subject to the cautionary statement contained in the supporting slide shop.
Actual results can differ materially from the forecast projections included in the forward looking information presented today, all non-GAAP financial measures referenced in our prepared remarks are reconciled to the related U S. GAAP financial measures in our 2020 annual MD&A also unless otherwise specified all financial information referenced is in Canadian dollars with that.
I will turn the call over to David.
Thank you and good morning, everyone I'm happy to be hosting today's call from Snowy St. John's as Fortis as new President and CEO following Barry Perry his retirement at the end of 2020 before we get started today I hope, you're all staying safe and healthy as we continue to manage our way through this pandemic.
As we look back on 2020, it proved to be a successful year at fortis on many fronts. Despite the challenges of the year presented the value of our locally driven business model has never been more evident our teams across North America leaned on our shared values and each other to find the best solutions to navigate through the year.
We continued to demonstrate our commitment to safety, while delivering the central service our customers with the high level of reliability that they have come to expect even with the pandemic and record weather impacts of several of our subsidiaries and we kept moving our business forward, we invested $4 $2 billion in our systems our largest.
Annual capital spend to date, increasing our rate base by 8%.
On the sustainability front, we announced the corporate wide target to reduce our carbon emissions 75 per cent by 2035 compared to 2019 levels. We also saw the constructive resolution of key regulatory proceedings, including T piece of recent general rate application, which Jocelyn will speak to shortly.
'twenty 'twenty was a strong safety and reliability of year for Fortis and fact that we recorded the best safety performance in our history with safety incidents decreasing 25% over the prior three year average this was a significant accomplishment during the pandemic and the execution of our record cash.
<unk> investment plan.
On the reliability front, we remained consistently in the top quartile relative to our Canadian and U S peers.
This continued focus on reliability doesn't go unnoticed last month, two of our utilities ITC and central Hudson, We're presented with the Edison Electric Institute Emergency response Awards.
<unk> was recognized for its quick and safe restoration following the derecho windstorm in Iowa and Central Hudson was recognized for its outstanding Storm recovery performance following tropical storm <unk> we.
We're incredibly thankful for the cruise and customer service teams as this would not have been possible without their hard work and dedication.
In 2020, our management teams were able to tap into a vast network of expertise across the Fortis group to stay focused on what matters most of our employees customers and local communities approximately half of our 9000 employees transitioned to working from home, while our field operations and critical line.
Site functions adapted operations to ensure we safely kept the electricity and natural gas flowing to our customers. We supported our 3 million customers during the pandemic by offering flexible payment options suspending disconnections waiving late fees and deferring scheduled rate increases and in the.
<unk>, we serve we donated over $15 million throughout the year, including $5 million, specifically for COVID-19 community support.
As we have noted in the past our sales are trending consistent with the industry generally speaking we continue to experience higher residential sales tempered by lower commercial and industrial sales in 2020, 83% of our revenues were from residential sales are protected by regulatory mechanisms with.
The U N S and our other electric segments, having the most exposure to changes in sales during.
During the fourth quarter retail sales at the segment increased by 1%.
Favorable weather in Arizona contributed to higher sales at U N S, but excluding weather related impacts sales that U S were still up 2% over the same timeframe in 2019 for our other electric segment sales were down 3% in the quarter driven by reduced tourism in the Caribbean.
During the year, our utilities invested $4 $2 billion into our energy systems. This record level of capital was $400 million higher than 2019 increased rate base by 8% and represents investments to support delivering of cleaner energy future.
Notably, we invested $500 million during the year and the also ground day wind project in Arizona. This 250 megawatt wind generation facility is owned by Tucson Electric power and will complement the existing solar generation portfolio commissioning is expected to be completed in the first half of 'twenty 'twenty one.
In 2020, we establish a corporate wide carbon emissions reduction target of 75% by 'twenty 35, all of our utilities will contribute to the corporate wide target with the majority of being underpinned by TPS integrated resource plan. This plan calls for an additional 2400 megawatts of wind and solar and.
1400 megawatts of energy storage to support the closure of all of <unk> coal generation assets by 2032, TEP alone will almost quadruple the current renewable energy generation capacity of Fortis by 2035. Additionally.
Additionally, <unk> integrated resource plan calls for adding 170 to 200 megawatts of solar by 2035, we expect 99% of our assets will be dedicated to energy delivery, our carbon free generation.
We remain focused on continuous continuously improving our already highly ranked ESG profile from a governance perspective, we are consistently recognized for our practices that are grounded in local leadership and independent board oversight in 2020, we launched our corporate wide income.
<unk> and diversity Council sign the Black North initiative and continued our focus on gender diversity to day, 60% of our utilities have either of female CEO or board chair and women represent 40% of the Fortis Board.
Turning to slide 11, this past September we rolled out our new $19 $6 billion five year capital plan, reflecting approximately $4 billion of annual investment in our utilities virtually all of our planned investments are regulated and consist of a diverse mix of highly execute.
<unk> low risk projects needed to maintain and upgrade our energy infrastructure. The capital plan is expected to grow rate base from $35 billion in 2022 over $40 billion in 2025, an increase of $10 billion or nearly one third this.
This yields of five year compound annual growth rate of approximately 6%.
Within our portfolio of utilities, there are several opportunities to expand and extend investments across our businesses, including connecting route renewable energy resources to the grid, adding LNG infrastructure, increasing investments in energy efficiency and expanding low carbon transportation.
Additionally, the Biden administration has proposed the sustainable infrastructure and equitable clean energy plan, calling for net zero emissions in the U S by 2050 and carbon free power from the electricity sector by 2035, this could accelerate capital investments at our U S utilities through transmission.
The interconnections of renewables that ITC clean generation and energy storage in Arizona, and electric vehicle infrastructure and the non U S States we serve today.
In the fourth quarter, we increased our quarterly dividend by five 8%. This marked 47 consecutive years of dividend increases with our low risk energy delivery business and strong growth outlook, we remain confident in our ability to execute on our 6% average annual dividend growth guidance through two.
25.
I will now turn the call over to Jocelyn for an update on our fourth quarter and annual financial results.
Thank you David and good morning, everyone.
For the quarter adjusted net earnings of $320 million or 69 cents per share 43 million or seven cents per share higher compared to Q4 2019.
For the year adjusted net earnings was $1 2 billion or 7% higher than 2019 adjusted earnings per common share was $2 57.
This represents the two cent increase compared to last year. Despite the significant equity issuance at the end of 2019 I'll get into the details of the drivers of earnings and EPS growth in the next two slides.
Slide 15 highlights the EPS drivers for the quarter.
Starting with our largest utility ITC contributed a five cent EPS increase for the quarter the increase related primarily to rate base growth and timing of earnings associated with the November 2019, FERC Roe decision.
Our U S electric and gas utilities contributed of three cent EPS increase for the quarter, our Arizona business contributed of two cent EPS increase driven by higher retail sales and an increase in the market value of certain assets held in trust to support retirement benefits.
The increase was tempered by rate base growth not yet included in rates and incremental credit losses associated with the pandemic.
In New York Central Hudson increased EPS by a cent driven by rate base growth.
And the two cent EPS increase for our other electric segment was mainly attributable to timing of purchase power costs at Newfoundland power.
Our energy infrastructure segment contributed of two cent EPS increase driven by production at the believes hydroelectric generating facilities due to higher rainfall as you might recall believes experienced drought like conditions from most of 2019.
The one cent EPS decrease for our Western Canadian utilities was mainly due to timing of operating expenses at Fortis BC and in our corporate and other segment of the ones that EPS decrease was mainly due to a lower income tax recovery offset by lower finance charges and operating costs and lastly, a higher number of shares contributed.
The three cent EPS decrease for the quarter.
Now to slide 16, adjusted 2020, EPS increased two <unk> to $2 57, compared to 2019 EPS contribution from ITC was six cents higher compared to last year, driven by strong rate base growth as a result of record capital investments of $1 2 billion made in 2012.
<unk>.
The higher base ROE and lower business development expenses also contributed to the increase.
Our U S electric and gas utilities contributed of three cent EPS increased compared to last year.
A two cent EPS increase in Arizona that was driven by higher retail sales, mainly due to favorable weather.
As you recall Tucson experienced its hottest summer on record in 2020, the increase was offset by similar items, we noted for the quarter, including regulatory lag and incremental pandemic related costs.
The one cent EPS increase of central Hudson was driven by rate base growth offset by an increase in costs associated with COVID-19.
Hudson continues to track all COVID-19 related cost in conjunction with the generic proceeding initiated by the New York Public Service Commission.
Our western Canadian utilities contributed a three cent EPS increase driven by rate base growth offset by the impact of the P. B our efficiency carryover mechanism recognized the importance of Alberta in 2019.
Our energy infrastructure segment contributed the three cent EPS increase driven again by increased hydroelectric production.
And the one cent EPS increase for our other electric segment was mainly attributable to higher income from believes electricity offset by lower commercial sales in the Caribbean.
Next the higher U S dollar to Canadian dollar foreign exchange rate favorably impacted annual results by one cents.
Lastly of higher weighted average share count from the advancement of our equity funding of late 2019 lowered EPS by 15 cents.
As we look across all segments in 2020 of COVID-19 impacted annual EPS by approximately <unk>.
This mainly related to the decline in tourism in the Caribbean as well as incremental pandemic related costs that U S energy and central Hudson.
As you can see on slide 17 of the bulk of our five year capital plan is expected to be funded with cash from operations and debt issued at our regulated utilities with the remaining 6% funded through our dividend reinvestment program.
With the recent reinstatement of the 2% discount on the drip program participation has increased to approximately 35% consistent with 2019 levels. This level of participation provides additional funding flexibility reported.
We continue to remain strong liquidity with over 4 billion available on our credit facilities.
Our utilities were active in the debt capital markets in 2020, taking advantage of favorable pricing and issuing approximately $3 5 billion of long term debt, including the issuance of green bonds at both Fortis BC and TEP.
Our funding plan and strong liquidity positions us well as we continue to work through the pandemic and execute on our capital plan.
In 2020, we achieved the cash flow the debt ratio of just over 12% and of holding company debt ratio of 34%.
Back in 2018, we indicated that U S tax reform was expected to temporarily impact our cash flows and credit metrics.
2018 of our cash flow and holding company debt ratios have improved by 170, and 500 basis points respectively.
These improvements mainly reflect the actions we took in 2019, including the accelerated equity issuance and the sale of the one of the expansion along with the strong credit profile all of our regulated utilities.
And even through the pandemic, we've maintained the strong credit profile as our utilities manage cost and regulatory mechanisms that served to stabilize cash flow and earnings have operated as expected.
In addition, a number of our key regulatory proceedings have concluded with constructive outcome.
Overall, our credit metrics, coupled with Fortis is low business risk profile positions us well within our existing investment grade credit rating.
Turning now to the recent changes in the U S dollar to Canadian dollar about two thirds of our earnings in the similar portion of our five year capital plan come from the U S. Now as a reminder, our five year capital plan is currently based on the foreign exchange rate of 1.32 to.
To help mitigate foreign exchange exposure, we do use natural hedges, including approximately 2 billion of U S denominated corporate debt and forward foreign exchange contracts.
With our hedging strategy.
Every five cent change in the U S dollar to Canadian dollar exchange rate is expected to impact annual EPS by approximately six cents on average and would result in a $400 million change in our capital of five year plan.
On balance we remain comfortable with our hedging strategy, but we will continue to monitor exposure going forward.
As David mentioned earlier 'twenty 'twenty was a busy year as many key regulatory proceedings concluded.
Most recently, the Arizona Corporation Commission issued a constructive rate order in the Tucson Electric power General rate application filed in early 2019.
Overall, we were pleased to bring the rate case to conclusion at the end of 2020.
The new rates effective January one reflect the requested rate base of approximately $2 7 billion U S equity thickness of 53% and allowed ROE of 915 per cent.
The return on fair value increment of 20 basis points.
T. P. Also received approval of two new adjusters. The first is the tax expense adjuster mechanism and the second is the transmission cost of adjuster, both helped to reduce regulatory lag at the utility.
Now turning to an update on some of our ongoing regulatory proceedings at ITC. The notice of proposed rule, making on transmission incentives remains outstanding. This item was on <unk> January open meeting agenda, but was deferred with no clear visibility on timing of next steps.
In August Central Hudson file the general rate application with the New York Public Service Commission as its current three year rate plan concludes on June 32021 settlement disclosed settlement discussions commenced last week and we expect the decision in 2021.
Last month, the British Columbia Utilities Commission announced that of generic cost of capital per screen will be initiated in the spring for all of regulated utilities in BC, including our gas and electric businesses to set cost of capital parameters effective January one 2022.
In Alberta, we received a decision on the 'twenty and 'twenty, one generic cost of capital proceeding current cost of capital parameters remain in place on the final basis for 2021 indeed.
In December of the AUC initiated a new proceeding to establish post 'twenty 'twenty one parameters with the decision expected by the end of the year.
And lastly in November of the AUC issued a decision on the Alberta independent system, operator tariff application, resulting in Florida, So BARDA retaining approximately $400 million in transmission related investments a new.
New preceding was initiated by the AUC to assess whether the customer contribution policy should be modified on a prospective basis for future transmission related investments of decision is expected in the second quarter of this year.
And with that I'll now turn the call back to David.
Thank you Jeff one of 2020 results are a testament to our business model and our people demonstrating what we can achieve when we come together as one strong company per.
Personally I'd like to express my sincere thanks to our 9000 employees. They have shown tremendous commitment and dedication in serving our customers throughout this pandemic and I'm proud to be part of this team as we move forward safety affordability and reliability will continue to be front and center in everything we do as we grow our.
Mhm energy delivery business with the tremendous potential in the our company coupled with our low risk growth platform and strong ESG profile I couldnt be more excited to be leading fortis I will now turn the call back over to Stephanie.
Thank you David This concludes the presentation at this time, we'd like to open the call to address questions from the investment community.
Thank you, ladies and gentlemen, we will now conduct the question and answer period. If you would like to now register for a question. Please press star followed by the number of one on your telephone keypad. If your question has been answered and you would like to withdraw your registration. Please press the pound key if you are using a speaker phone. Please lift your handset before entering.
Our request.
Just wait a moment to compile the Q&A Rob.
And your first question will come from Ben Pham from BMO. Your line is open.
Alright, thanks, good morning.
I know you mentioned the impact of that.
From COVID-19.
Does that include the expected impact of the delay in the.
The rate cases, and that's not being able to the they're actually quantify what that impact wise protest the 20th.
Yeah, no that doesn't include the TEP delay impact and Jocelyn can fill in the second half of that question. Yeah. No ban. It just includes the I guess the lost earnings in the Caribbean are due to the tourism and also credit losses, mainly per central Hudson and the U N S. The.
T P rate case, the S was effectively delayed because of COVID-19, but it was substantially offset by the hot weather that they had so we didn't classify that a T. P was disadvantaged because of COVID-19 because they made up for it in warm weather.
Okay.
The so we just look at the impact of the warm weather that that gives you the they're actually of what the impact of the rate case, Wisconsin, Yeah for sure I mean, there was delayed because of the pandemic and so yes. You are right. It is of Covid related impact for TEP of just said it was offset by the fact that they had.
Obviously, the heart of the temperatures on record.
Okay.
I know some of your slide you mentioned.
The 99% of assets regulate and that's our target for Chad from 13th of CASM 35.
What is your appetite.
For non regulated assets in this environment, whether it's <unk>.
The vehicle is hydrogen.
Renewable assets Nonregulated, I mean is there any appetite for you guys in this market.
Yeah, Ben so yes.
I think theres a lots of unwrap there in that question, because there's a whole bunch of different sort of unregulated investments that you listed there when you think about the hydrogen or some maybe even renewable natural gas that we might be doing out there we could be looking at doing out and in.
In B C.
You know there are some things around the edges of our normal business that we continue to look for and look at obviously, our priority is executing that $19 6 billion capital budget and then also looking at how we can extend and expand that based on the drive for more renewables in the U S and across Canada. So are our main focus.
Execution.
On the regulated rate base that we have in and adding to it where we can.
As far as the unregulated.
The assets, we will look at doing them, if they make sense right. They have to have the right risk and return.
We have to have the expertise and be able to being able to execute it. If those things match then we'll look at doing it other than that we want.
Okay very good thank you.
And your next question will come from Robert Kwan from RBC capital markets. Your line is open.
Good morning.
Just wondering if you've got some thoughts on the early actions under the by the administration of the impact of your utilities, including any commentary on your line.
The policy and how you think that might play out.
Yeah, Robert it's good to hear from you. Yes. This is this is obviously a big item of conversation across our industry. We're trying to all figure out what all of the all of the executive orders mean, the policy changes the.
The new commissioners at FERC, the new chair of FERC.
We I think we all get the the fact that Directionally, where this is going obviously with the by the administration coming in very very focused on.
Reducing greenhouse gases are very strong push towards electrification of the things like transportation.
It means it means that there's going to be a lot more in our electricity sector. That's gonna be need that's going to need to be invested in over the next years I mean, when you think about not just the the regular transition that has already been laid out by so many utilities from coal to renewables, including us in Arizona.
Now you're looking at not just that transition, particularly in the Itc's footprint.
Utilities in their footprint that are looking at doing the same thing not just that transition from coal to renewables, which needs of renewables and of course, then needs. The transmission of the connect those renewables to where the to where the customers are but also it's going to be driving a lot of electricity demand as we look at electrification efforts.
So directionally, we know it's going up it's really hard to determine at this point, what the magnitude and the speed of those changes will be and that's what we're working hard on doing across our our different jurisdictions. This could be an acceleration of the transition plan that we have at TEP from.
Coal to renewables, the as Youll recall, and we've talked about quite a bit we have a lot of investments for the $4 billion to $6 billion level of investments that we would need to do in order to get to that transition.
And most of that is outside the five year capital plan. So maybe some of the things some of the incentives that the by Dint of administration does brings that closer in maybe there's incentives that can go for the impacted communities, where those power plants are of that could allow us to accelerate some of that stuff.
The boy the Big E V push theres the conversation on social cost of carbon where is that going to go.
We don't we can't quantify it. Unfortunately at this point Robert but we are we are working on figuring out how that will drive our business going forward.
Anything specific from the first policy.
Yeah on the.
And foresee policy I mean, I, just actually was reading an article last night.
On the an interview with the Chairman Glick and I think the that that article of saying all of the right things I wouldn't interpret it for you, but I mean, it's out there it was an SNL article.
But in that interview he was talking about the importance of things like <unk>.
Incentives, obviously and trying to figure out how we get power lines permitted where we're back to having the conversation again in the U S of the.
Not just the transmission that we need it but how can we build it better and back in the day and the energy Policy Act of 2005, there was the requirement for the department of energy in the U S to create these national interest corridors I think that thing has to be kick started again, so that we can figure out how to build the bigger backbone that are that our transmission.
System is going to need to the interconnect markets.
And to go long distances to connect the in the regional renewable energy resources to where we need them. So I think the that policy is all going in the right direction. Its going to be you know a democratic led FERC I'm sure they'll end up with the Democratic majority of them later this year and in that they're going to they're going to they're going to have to be addressed.
In the policy and the incentives that are needed to increase transmission that everybody is aligned with that with that thesis and that's aligned with the bite in the energy transition plan. So I expect to see some good things coming out of FERC kind of going forward basis.
I guess, maybe just to finish the Dave now that you're in the CEO chair, while the valuation of differentials have narrowed just what.
Your thoughts on.
Ratio and leverage.
And I guess ultimately.
Do you view the key.
Utility stocks for the U S utility stocks as your peers.
So yeah, we look at our book right I mean, we obviously have both.
Both Canadian and U S utilities and from a peer perspective, we look at we look at everybody and you know my goal of CEO is for them to all be looking at US right. So at the end of the day, we want to be the peer that they're looking at how are they doing so well how are they getting the trading multiples. They are because we have the right story from a growth perspective, we have of rights of the right store.
Free from of greenhouse gas ESG perspective, we get we got to get out there until that story more so I'm I'm not necessarily as concerned comparing us to them I just want to make sure that there that we're looking behind the behind us to see them.
It's just the comments on payer from leverage.
Say that again.
Specific comments, the address of the payout ratio and leverage.
Yeah, Robert with payout ratios of what we've said is that we're comfortable in the 65% to 75% payout ratio, which.
It's pretty consistent with.
The Canadian utilities of paying utilities are higher in the U S ones are bit lower we've said from 65 to 75, we're comfortable with.
You know and as we.
We looked like David talked about with respect to the capital plan that we have and the opportunities that we have in front of us.
We're comfortable with that range.
Okay.
Much of.
Thanks Robert.
And your next question will come from Rob Hope of Scotiabank. Your line is open.
Yes, good morning, everyone.
One question from me.
What are you thinking about the potential Arizona legislation that would take away generation planning away from the regulator of it but it kind of more of the handful.
Of the policymakers.
Would it be fair to say that your generation of investment in the region may not be altered given that it's not necessarily being driven by we'll call. It. The regulators' stated goals about your own internal view of economics, and where you want to take that.
Yeah, Rob you nailed it in your note. This morning, it actually has nothing to do with what we're doing because when we put our integrated resource plan out the Tucson electric power. It was all about what we needed to do from an economic standpoint from affordability clean energy reliability, we got everybody in the room, when we develop that integrated <unk>.
Of course plan. It was what are customers of our community of.
Of regulators.
The consumer advocates this was something that we all circle down and said that's the right plan had nothing to do with the energy rules because there weren't any energy rules at that time and it was substantially greater than the existing renewable portfolio standard that exists in Arizona, So the which is which is actually a very low standard it's 15%.
By 2025, we're already.
Already passed that.
So in my mind and in our team's mind in Arizona It doesn't matter.
We built that plan and stood it up before the energy rules.
This is all about us executing on that plan because it's the right plan.
Alright, that's great. Thank you. Thank you.
And your next question will come from Michael a follow up on your from your line is open.
Hey, guys. Good morning morning, one of Michael Good morning.
Yes, one of the just circle back to the FERC transmission question. There I know, it's hard to really predict but as you mentioned, there's been a lot of talk around it.
Just any thoughts on timing.
Is it going to take until we get a democratic majority of FERC.
Hum.
How does it get effectuate a visit from FERC is it something from higher up within the value of administration, just maybe a little more context, there would be helpful.
Yeah.
That's a great question Michael the the.
Timing on what can be done and what will be done is obviously still up in the air I think the by the administration wants to move things as quickly as possible. So we're hoping it's quicker, but you got to remember too that as you said policy. It takes a long time for it to basically roll out through the industry.
We are hopeful that.
At the end of the day, we see some action on the loved.
The big things right. There's there's things that we're looking for from from FERC in order to streamline things like planning and siting of debt that I mentioned on the National corridor of conversation looking at how we better manage queues within the R. T O interconnecting renewables.
Cost allocation is always a big deal incentives all of those things have to be addressed and frankly in our mind the sooner the better because like I said, we know we know the direction, we'd like to see one get the pace of that direction into what's the magnitude for us and how do we get in there and that's why we're working behind the scenes and push.
To get some of these things done through the various trade groups as well.
Great. Thanks, and then my other question was just on all of them.
I know you guys didn't give official guidance for 2021, but just any.
Help on the key drivers, we should be thinking about.
The.
The earnings growth the spin.
Relatively muted in recent years and now that you've got the Arizona rates in effect should we be expecting a pretty material step up in.
The other context around that.
Well, Michael you're right, we don't give earnings guidance. So my fall back as always that over the long term you know earnings should proxy.
The base is over the long term, but it is not linear as you say.
With things like the U S rate case that was concluded they had a decent year, mainly because of weather so as they head into next year with new rates.
Then I would say that we all have to make our own assumptions with respect to whether because it's tough for us to sit here and make those the.
Make those calls but.
I would say that all of our utilities have clear of the slate on uncertain regulatory proceedings Theres no cost of capital hearing for 2021 with the exception of the Central Hudson and I don't expect any material change there.
So I would say all utilities are set up for us for good growth and and where but we've also level set with respect to the equity that we've done because so that was 2019. So no no major drag there from an equity perspective, so we're looking forward to 2021.
Okay, great. Thank you. Thank you.
And your next question will come from Mark <unk> from CIBC capital markets. Your line is open.
Thanks, Good morning, everyone maybe.
Yeah come back too.
The transmission incentives to one of them.
And the dead horse, but just the article that came out last night you referenced David.
And just maybe just reconcile we think in terms of prior to sent from Chairman Glick.
Round participation adders, but supportive of it of that he seems like supportive of of incentive. So if you had of sitting here today when you kind of square it all up is your view still debt.
Its upward bias on the total instead of the.
That's true.
The ITC.
Yeah. So.
You guys aren't like in my answer so I'm going to kick this one over to the Linda to provided a little bit of additional color because she's obviously got this topic front and center Linda obviously, the Linda Linda as our CEO of ICT.
Great. Thanks, Dave and thanks, Mark for the question.
Well I would I would put it in in sort of those contacts I mean, clearly we don't know right in terms of exactly flat line correct.
Right.
Nathan it's typically want to do with respect to the notebook or and certainly I think it's true.
As time moves on we'll learn a little bit more in terms of at least what next steps are with respect to the timing of the note for and ultimately you know kind of the decisions from Marin.
What I can tell you wouldn't say or what I would emphasize I mean, I know like has been certainly public in his comments in the past.
He is probably not the biggest fan of.
The specific Roe incentives.
But I would say.
Clearly understand the need for investment in transmission infrastructure.
Particularly to facilitate renewable.
And so you know my my belief is and I remain very optimistic in terms of the.
Kind of of the actions that will take to continue to drive investment in transmission.
And the behaviors that will drive the investment in transmission and while it may not be what I would say you know it could it could modify slightly from sort of of the typical all in ROE adders.
To really what I think ultimately, it's really going to be making the transmission pie bigger.
And so I think as Dave did a nice job of leading to you know.
We're going to see the transmission landscape and the transmission pie.
GAAP significantly bigger because I think everyone recognizes.
The transmission is the key enabler to the Biden.
Kind of clean energy plan and so you know.
Maybe will it be exactly what we've seen in the past we don't know.
But what I do know is that it does the understands both the role of incentives in driving investments in transmission as well as you know and I think Dave alluded to the energy policy Act mandated he's required to offer incentives for transmission investments.
Obviously, we want to take a wait and see approach to see what comes out of there, but I am more optimistic than ever.
In terms of sort of I think how the landscape is evolving I've never heard I think so.
You know focus in conversation about sort of of the central role of the transmission plays and meeting our future Decarbonize the nation goals and the transmission incentives from Doper plays a huge role in that so I am extremely optimistic about how that no for cash.
Help drive future investment in transmission and frankly make the transmission tie a realizable.
Quicker faster sooner than it otherwise maybe cut of that.
Yes, Mark I would I would just add I know, we're talking about the same articles. So it seems that you read it but the I think it was clear and I'd I'd hate the quota article on us on an earnings call, but it said that the chairman Glick you said that the incentives in the node per the reason that he dissented from it before is it didn't go through.
Far enough to incentivize lines built.
Pursuant to the state and federal policies or guess, what we're looking at a whole bunch more state and federal policies in order to get renewables, where they need to be in order to get transmission built how it needs to be to meet the policy requirements of the states and federal governments.
That to me was a real positive comments.
Got it thank you both there and the Linda.
Final question, maybe just on central Hudson and just.
It sounds like you guys have entered into a settlement discussion that you guys have timelines in and give a sense on whether or not it's the pursuit of a multi year rate plan or would you go shorter term sure Michael.
The Mark sorry, we're going to turn that over to Charlie Freni Who's the CEO of the central Hudson He's on the line to answer that one.
Good morning, Mark.
The settlement settlement discussions have just begun.
So at this point in time, we know we're optimistic that we'll work through it hopefully come to a settlement before the July time frame, but we have been it has been signaled to us debt.
I'll probably be of process. It will take more than 11 months of typically we haven't made the make whole provision if it goes beyond.
The end of a rate year, whether its multiyear or not I mean that does come out of the settlement conversation as well, it's quite likely it will be of multiyear that generally part of the conversation.
Okay. Thank you that's.
That's all I had thanks Mark.
And your next question will come from Andrew <unk> from Credit Suisse. Your line is open.
Okay.
I guess the question is really about alternatives for capital pools, and it's something that will produce some of the powerhouse, but when we look at the Duke deal with the GIC, Duke Energy, Indiana how.
How do you think about that from the standpoint of.
Central.
The use of surfaces and value in the portfolio of expense today or just for capital deployment of one of the future I'm sure.
So the let me sum that up I don't think Johnson was able to hear the question looking at alternative capital pools, like GIC in and Duke and bigger picture of how we look at that capital going forward Yeah. Andrew We're always looking at that every time, we go through our capital planning exercise so.
We've often said that everything goes back on the table. So it was interesting that these deals are being done two of them.
Two I guess.
Delay of any further equity issuances, which you know for the right price I think it's of a fair thing to do I mean, we clearly went to market with our equity requirements in 2019, So we're set up nicely for.
Our five year capital plan, but you know listen if we can we can grow even further from where we are today then everything goes back on the table and all of them all of those things are things that we consider every time, we look at funding options.
Okay. That's that's helpful.
The different direction from my second question, it really relates to cyber and cyber security and obviously, that's an important industry issue, but given the pandemic the environment with I think you've sort of half your employees effectively working from home.
The cyber security changed.
Over the period of time line.
Oh, yes.
Definitely.
Of our attention on.
The cyber perspective.
It is already ramping up extremely fast I'll say, even over the past more than five years. The the conversations that we have in boardrooms of conversations we have within our utilities, having CIO is that our large utilities, having a chief information officer at Fortis to help coordinate all of those efforts.
And then two obviously out of the complexity of having.
Almost 4500 people working from home over the past year.
All of those things of the amped up our focus on cyber security and then of course, you know there's the there's world events to the obviously make you pay more attention to things, particularly us we do have the the.
The criteria of the critical infrastructure.
We have meets the criteria for federal government.
Requirements and so we keep a close eye on that but we have to continuously go above and beyond that because there is nothing more critical than our infrastructure because at the end of the day. Our infrastructure is what provides everybody else's infrastructure the ability to work. If you don't have of the energy flowing.
Then you will not have an economy flowing so it is extremely important and right in the center of our Bull's eye from the from a strategy conversation.
Okay. That's great. Thank you. Thank you.
And your next question will come from David Quezada from Raymond James Your line is open.
Thanks. Good morning, everyone. My first question here just on <unk>.
On the Lake Erie connector I'm wondering if you've had any engagements with the Ontario government recently, and what kind of timeline of hurdles you'd be looking at over the next year just in terms of potentially moving forward there.
Yeah, I'll I'll turn that over to Linda because she's the one who has her finger on the pulse on that project Linda hopefully you heard that the question. It was about the Lake Erie connector and status of their own okay, Yes, I did.
And thanks, David for the question.
Yes, I mean, we are in continual engagement with the Ontario government as long as the I, yeah. So with respect to the Lake Erie Connector project and while I don't have any specific.
Kind of status update the certainly I can share.
Can continue to say that we continue to remain optimistic based on sort of what I would say are the conversations the tenor of those conversations and the progress with any of those conversations.
At the time that not able to specifically say timeline wise when we won't have any any type of meaningful update but I would say things remain optimistic fourth line.
Excellent. Thank you for that and then David maybe just one for you I guess you've been in your seat now for about six weeks.
Curious.
How you are planning to allocate your time over the next iron Mountain of.
100 days say and what will be your initial focuses now that youre in the rule.
Yeah, Thanks, David it's actually great to be.
Here in St Johns and I've been here for as of today 30 days.
It was great to get here and do my quarantine period, which of you have to do when you come into Canada, and particularly in the Saint John So glad to get you know.
In the office and be able to meet with the team.
And have some some some good conversations are our focuses is beefing up the.
The strategy that we currently have.
So we are we are we are very focused on our organic growth strategy and we basically have you know a whole lot more opportunities that we see that I mentioned earlier is coming from the <unk>.
Bush towards the clean energy transition, it's all about our business. It's all about what we do.
When youre looking at electrification.
It needs it needs of renewables in each transmission of knees distribution, that's the business that we're in when we're looking at growing the.
The demand that's of Great story for us when we're talking about.
The electrification of transportation, that's a that's a huge story for anybody who has anything to do with the electrons. That's the that's a way for us to pick up wallet share of our customers.
And reduce their overall net bills. So that that's the that's the focus that we have is the is to look now I think in a much more target rich environment for investments on a going forward basis, and the growing environment from a from the from I'll say the use per customer basis.
I think that's that's that's been my focus it's been the team's focus.
And we're really getting after it.
That's great color. Thank you very much.
Yeah.
And your next question will come from Matthew Weekes Industrial Alliance. Your line is open.
Good morning.
One quick question about sort of of the collection of our COVID-19 related costs going forward.
Are you tracking those costs on the account.
Sort of going through the proceedings I was wondering if you'd be able to quantify sort of the upside there versus maybe downside that you'd see in costs.
Tracking that maybe arent related to bad debt or that may not be recoverable of going forward.
Yeah, So really the only the owned the company that we have that's focused on that and central Hudson.
And the Jocelyn has got the numbers on that.
Matthew Central Hudson is still accumulating in them and providing it to the commission.
Potential upside at clubs the two penny.
The problem. So I would say that's the potential upside I won't make any guess as to.
The success Theyre going to have but that's the potential upside.
Okay. Thank you that's it from me.
Thanks, if I can if any if anybody.
Mike The ask a question. Please press star one on your telephone Keypad. Your next question comes from Julien Julien Dumoulin Smith from Bank of America of your line is open.
Good morning, everyone. This is Ryan Greenwald on for Julien.
And I appreciate you taking our questions.
So just the follow up on the earlier question around the unregulated assets can.
Can you provide a bit more color around the right risk return and potential assets you'd be looking at net given how low the cost of capital is from renewable buyers. It seems like it would be tough to be competitive, but just curious how you frame of thing yeah. That's just said it is tough to be competitive and we'll know a good deal and when we see one but we are we really haven't seen one yet and frankly the.
The thing that we need to focus on is the supporting infrastructure around those investments the the actual investments in the wind projects and solar projects with you know we can let other folks race of the bottom on on returns on those what they need is all of the good regulated infrastructure to get it from that site two of customer's door.
And that's what we focus on is building the all of that stuff around it and there will be enough of that stuff the build around it that supporting infrastructure, whether it's transmission distribution and storage.
The ancillary services all of the things that we need to do and provide us as utilities.
That's going to be real fertile ground. So we don't feel right now that we have the need to go into that last little bit.
So that's where we're I believe that.
Are you guys looking at actual RMG at all.
Yes, yes up and up in the BC Fortis BC, Roger Dunn Antonio and his team had been had been looking at that they actually have a goal already.
They were one of the first I mean, they were they were they were out on this stuff before it was a topic really and set of 30 by 30 goal to reduce the.
The greenhouse gas emissions from their customers and a lot of that has to do with focusing on things like energy efficiency like renewable natural gas.
We're looking at having I think it's 15% of their.
Supply from RMG, which opens a lot of opportunities for us to invest in that.
If we can do it within the regulated utility we have we can always do that as a combination which we have to date of of basically ppas or purchases or have the opportunity to invest in and of course, we're kind of.
We're around the edges on the hydrogen conversation too we actually are very active in BC on those conversations looking at studies on how we would do it but of course that's early days.
<unk> is getting a lot of a lot of attention, but that's I think it's early days in that conversation, but all of that stuff provides opportunities for us to stretch out a little bit beyond just the just the pipes up there in BC and start getting into the supply of little bit.
Are you guys any particular focus on the non utility side.
Just in terms of exploring RMG more broadly as an unregulated assets.
No no no.
That's why it's one of those things you gotta get expertise and experience in before you want to do it outside the U.
Get out of your knitting you got it you got to get that expertise you've got to create your own competitive advantage. Then you see what you can do with it. So it's still early days on that too.
Got it fair enough and then maybe just lastly on the FX. It seems like a wait and see from the status quo right now around exploring further hedging strategies, but any more color you can add there around your thought process given the unfavorable inflection.
Well Brian.
We did take advantage of the market earlier in 2020, and we did put in some additional hedges so we continuously.
<unk> watched the watch the market right now we're comfortable with what we have and but we do continue to just watch it and and if the time is right and the market conditions of line, we may do a little more hedging.
Great I appreciate the time frame.
Thanks Ryan.
Thank you everyone Tonight, but I have no further questions. Thank you I'll turn the call back over to Mr. Mimo for closing remarks.
Thank you Michelle we have nothing further at this time. Thank you from participating in our fourth quarter and annual 2020 results call. Please contact Investor Relations should you need anything further. Thank you for your time and have a great day.
Thank you everyone for joining today. This will conclude today's conference call you may now disconnect.
Yeah.
And the revenue.
Yes.
[music].